ABSTRACT

Workfare schemes impose work requirements on beneficiaries. This has seemed an attractive idea for self-targeting transfers to poor people. This incentive argument does not imply, however, that workfare is more cost-effective against poverty than even poorly-targeted options, given hidden costs of participation. In particular, even poor workfare participants in a labor-surplus economy can be expected to have some forgone income when they take up such a scheme. A survey-based method is used to assess the cost-effectiveness of India's Employment Guarantee Scheme in Bihar.